Business Directories

BP sees final deal on Iraq oilfield by year end

London, July 29, 2009

BP expects to miss an Iraqi government target to finalise an oil field development deal next month and instead sees a final agreement later this year, chief executive Tony Hayward has said.

Abdul-Mahdy al-Ameedi, deputy director general of Iraq's contracts and licensing directorate, had said recently that he hoped a deal with a BP-led consortium to develop the Rumaila field could be finalised at a meeting in August.

"That's probably not realistic, not least because it's Ramadan in August," Hayward said, adding that he hoped to conclude details of the contract by year end and to begin work next year.

The consortium, which includes China's CNPC, won the right to develop the field at an auction in Baghdad earlier this month.

Hayward denied the later than targeted completion of the deal was because BP needed to revise its offer significantly after being forced to halve the amount it offered to charge the government to secure the contract.

Other oil companies refused to meet the Iraqi government's demands and seven of the eight contracts on offer in the auction were not taken up.

Analysts have questioned BP's ability to make money from the contract but Hayward said the project competed well with others in the BP portfolio in terms of profitability.

"We feel very happy and confident in the position in which we find ourselves," he told a call with analysts.

Hayward said that CNPC's participation would enable the consortium to execute the project at a low cost.

"Our relationship with CNPC is important because it provides us access to the Chinese supply chain and one of the key levers is getting your capital and operating costs low so that you realise the available margin," he said. – Reuters